Appraisers show concern over the increased values, particularly in the resort market. I have had occasion to talk to two appraisers this week on lower than contract price appraisals (clearly, not my favorite conversation).
As realtors, we are often called by appraisers to confirm details on a property that may or may not show on the MLS…such as furnishings, or any concessions, like HOA fees, or seller assistance to buyers closing costs, etc. However, we realtors are not to make any contact or input to the appraisers directly ourselves during the appraisal process (kind of a one-way street).
In the instance of the first property in Mauna Lani Resort, the appraisal came back $20k less than one comp of the same floor plan and $25k less than a second. A distressed sale that was included from several months back threw the numbers askew. When the client inquired why the value was placed so low, the appraiser indicated the market had “stabilized!”
The client/buyer did not qualify for the loan they had applied for and would not be able to purchase the property due to the low value. (They could come up with the $20-25k difference ouf of pocket themselves, but that isn’t always an option for many buyers.) The lending institution refused to order a revision, or accept a second appraisal! (I could mention the name of the lender, but that would be bad juju – and not all lenders are created equal!)
The second situation was similar, but nearly a $200k difference from appraisal and contract price. The buyer in this instance was realistic and able, so they bought at the previously agreed upon price. After all, appraisers don’t include furnishings, vehicles (which are sometimes included), nor any income bookings in the case of a vacation rental.
As I write this blog, the following information just came into my email from a very reliable source:
“Big Island sees 46% jump in median sales price for condominiums in July. The median price of a condominium on the Big Island jumped 46 percent in July, while the median price of a single-family home rose by 13.5 percent, according to data from Hawaii Island Realtors via Hawaii Information Service.
The median price of a condo on the Big Island hit $377,000 in July, a 45.6 percent increase from July 2013’s median price of $259,000. However, sales of condos dropped 18.5 percent to 53 units sold, from 65 units sold in July 2013. Nearly half of the condo units sold — 32 — were sold in North Kona.” Pacific Business News.
Bottom Line
Ok, it happens…point being, appraisers are human and provide “opinions” of value. However, don’t be so fast to take that opinion as gospel. Chances are, if you can show proof why the value should be increased, you may just save the deal for your clients! There are options.
If you want to the know the prices and trends in a particular market…ask a professional realtor who specializes in that market. As I have said many times, Google doesn’t live on the big island…we do.
Living and loving my resort life!
Jeremy Stice, R(B), ABR
August 6, 2014
Aloha Pam,
Thank for sharing this post. I do a lot of my business in the resort communities of West Maui and just recently encountered a short appraisal on one of my listings. The buyer asked for a price reduction on the property to be in line with the appraisal value. I encouraged my seller client to stand firm and put together an written argument on his behalf about the value propositions of the property; don’t you love selling a property twice?
Anyway, it worked as the buyer was in a position to come up with shortfall and we closed at the appraised price.
On another transaction that I represented the buyer on recently, the appraisal came in about 10% short and the seller was not willing to lower it all. My client deciding to cancel and the next week, another property came on the market that was twice the price and my client decided to purchase and close on that one instead- interesting how real estate works sometimes!
Jeremy Stice, R(B), ABR
August 6, 2014
Aloha Pam,
Thank for sharing this post. I do a lot of my business in the resort communities of West Maui and just recently encountered a short appraisal on one of my listings. The buyer asked for a price reduction on the property to be in line with the appraisal value. I encouraged my seller client to stand firm and put together an written argument on his behalf about the value propositions of the property; don’t you love selling a property twice?
Anyway, it worked as the buyer was in a position to come up with shortfall and we closed at the appraised price.
On another transaction that I represented the buyer on recently, the appraisal came in about 10% short and the seller was not willing to lower it all. My client deciding to cancel and the next week, another property came on the market that was twice the price and my client decided to purchase and close on that one instead- interesting how real estate works sometimes!
Pam Deery, R(B)
August 7, 2014
Yes Jeremy; interesting indeed. It seems that the appraisers are as confused in the market as buyers and sellers. Do you only buyer things when they are on sale.. I think not!
Pam Deery, R(B)
August 7, 2014
Yes Jeremy; interesting indeed. It seems that the appraisers are as confused in the market as buyers and sellers. Do you only buyer things when they are on sale.. I think not!
Pam Deery, R(B)
August 7, 2014
In a clearly upward trending market, wouldn’t you expect each sale to be equal to or higher than the most recent? Of course it depends on individual circumstances, but generally speaking…
Pam Deery, R(B)
August 7, 2014
In a clearly upward trending market, wouldn’t you expect each sale to be equal to or higher than the most recent? Of course it depends on individual circumstances, but generally speaking…